FRC to OTC: What does this mean for short sellers of the stock?

OTC(Over the counter) exchange is a place for counters who fail to satisfy the normal criteria to be listed in the ordinary exchanges like NYSE or NASDAQ. As such, OTC counters can be said to be high risk plays as lesser regulations and oversight is exercised over these counters in terms of ensuring the companies' business, revenue and profitability are up to standard for a stable company.

FRC is likely to be demoted to OTC from its former exchange (NYSE) as JPM has hollowed out its profitable assets and deposits, leaving it only with corporate debt, liabilities and minimal revenue-generating assets. As such it definitely falls far short of a profitable company and is unable to remain listed on ordinary exchanges. If successfully moved over to OTC, FRC will have a new ticker, likely FRCQ, and will trade as before under this new ticker and via the OTC.

Now, a common misconception is that if FRC is to move over to OTC, short sellers of FRC prior to suspension are required to cover by buying back FRCQ shares to close their position. This is NOT TRUE. It is important to understand that FRC and FRCQ are recognized as different counters and different shares, in the eyes of the exchanges. Therefore, short sellers of FRC (before suspension) do not need to buy back FRC as FRC is no longer being traded. Brokers who lent shares to these short sellers will allow the FRC short sellers to keep the profit that they obtained when they short sold before suspension, and do not require them to buy back FRC (since FRC will be delisted on the NYSE and there is no way to buy shares of a delisted company). In summary, short sellers of FRC prior to suspension will realize 100% of their profit, minus all the borrowing costs they accrue until the broker recognizes their short sale and the lack of the need to buy back their shares. This also means that there will be NO short squeeze on FRCQ on the OTC on account of "short sellers on FRC prior to suspension having to buy back FRCQ shares".

Shareholders of FRC will be automatically be regarded as shareholders of the new FRCQ, as their FRC shares will be automatically converted to the OTC FRCQ shares, and they are able to trade there once the OTC allows the trading to begin. Short selling of FRCQ can also be done once trading begins there as well. As mentioned, imagine both FRC and FRCQ as 2 different counters, where FRC is delisted and not allowed to be traded on NYSE, and FRCQ is a whole new counter on the OTC where normal buying, selling, short selling can be done.

Hope this clears up most of the misconceptions about FRC's move to OTC. Will be happy to answer any queries in the comments to the best of my ability. Thank you.